FIVE-YEAR LABOR PACT COULD SAVE S.D. $20M

Mayor pushing for deal, but council Republicans not sold

Michael Zucchet, head of the city’s largest union representing white-collar workers, declined to comment for this story, citing the ongoing negotiations.

There’s incentive from all sides to get a deal done. Labor leaders would love to get across-the-board pay hikes for workers who have gone years without such an increase. City leaders want the savings generated from a long-term deal to go toward bolstering services.

The problem is identifying a pay hike that is amenable to both labor and at least six council members. Here’s a breakdown of the numbers at play:

The pension system’s actuary has estimated a five-year freeze would slash $25.2 million off the coming year’s $275 million pension payment. About $20 million of that would apply to the general fund. Over five years, the general fund would see about $110 million in combined savings.

Every 1 percent in across-the-board salary increases for city workers costs about $5 million annually to the general fund, so restoring the 6 percent cuts immediately would cost $30 million annually. That would create a $10 million deficit in the first year. A more realistic option would be to spread the increase gradually over the five years.

Of course, those calculations don’t include a variety of other budgetary factors to be considered when trying to determine if the city can afford salary increases, such as projected revenue surpluses in future years.

At Tuesday’s meeting, nearly every council member expressed support for a five-year deal, which led Democrats Marti Emerald and Sherri Lightner to question why a deal wasn’t already done.

“I hope the public recognizes the importance of thinking in a new way and saving this city revenues that would otherwise be lost if we don’t take advantage of that opportunity to exercise what’s been considered or viewed by proponents of Prop. B to be the magic bullet: the five-year labor contract with a freeze on pensionable pay,” she said. “I’d like to see the public hold our feet to the fire on this and make sure we don’t miss this opportunity to save money.”

A five-year pact would also have other financial benefits. Filner said the savings generated could allow him to not spend the $22 million in fire settlement from San Diego Gas & Electric to close next year’s budget gap as he has proposed. The city could also stop paying $450,000 annually on outside counsel for labor negotiations.

If a deal can’t be struck, the city will have to impose a one-year freeze on workers. That won’t generate immediate savings because the pension fund already assumed a zero percent increase for next year.